Lending licenses for Texas fintechs

Who licenses what

When a regulated loan license is needed

Under Section 342.005, a loan is subject to Chapter 342 if it meets all four conditions:

1. it provides for interest of more than 10 percent a year;
2. it is made primarily for personal, family or household use to a person located in Texas when the loan is made;
3. it is made by a person in the business of making, arranging or negotiating those loans; and
4. it is either not secured by real property, or is one of the real-property-secured loan types the chapter names and is mostly payable in monthly installments.

Section 342.051 then requires a license to make, transact or negotiate those loans, or to charge more than other law would allow. Banks, savings banks and savings and loan associations are exempt from that license, as are some others the section lists. The section also bars using any device, subterfuge or pretense to evade the requirement, which matters for fintech structures that relabel interest as fees or memberships.

Interest rates

Texas sets ceilings on interest through the Finance Code. Some ceilings are fixed, and some float with published indexes. A license often allows a lender to charge more than an unlicensed lender could. Getting the rate wrong can expose a lender to penalties that exceed the interest itself, so rate design is a legal question, not only a pricing one. Count every charge the customer pays, not only the stated rate, when checking whether a product crosses a threshold.

Credit access businesses

Payday and auto-title loans in Texas are commonly arranged by a credit access business, licensed by the OCCC under Chapter 393, which obtains credit for the consumer from a third-party lender. The model carries its own disclosure, fee and reporting rules, and many cities in Texas have adopted local ordinances on these businesses. Check the ordinances where your customers live as well as the state rules.

Bank partnerships

Many fintech lenders originate through a partner bank. The bank makes the loan under its own charter, and the fintech markets, services or buys the loans. The model can change which licenses apply, but it brings its own scrutiny: regulators and courts look at which party really bears the risk and benefits from the loan. The bank will expect a compliance program, fair-lending controls and oversight rights over you. What the bank checks is covered in sponsor bank due diligence.

Federal rules that apply to every consumer lender

• Truth in Lending Act (Regulation Z): cost-of-credit disclosures, including the APR.
• Equal Credit Opportunity Act (Regulation B): no discrimination, and adverse action notices that explain a decline, including declines made by automated models.
• Fair Credit Reporting Act: rules for using and furnishing credit report data.
• Electronic Fund Transfer Act (Regulation E): rules for electronic repayments, including a bar on requiring preauthorized transfers as a condition of credit.
• UDAAP: the prohibition on unfair, deceptive or abusive acts and practices, which reaches marketing, servicing and collections.
• Military Lending Act: special limits for loans to active-duty service members and their dependents.
• Gramm-Leach-Bliley Act: privacy notices and, for non-bank lenders, the FTC Safeguards Rule.

Getting a lending product licensed, step by step

1. Describe the product precisely: borrower type, purpose, amount, term, rate, every fee, and whether it is secured.
2. Map it to the Finance Code: which chapter applies, and whether any exemption does.
3. Decide the structure: direct lending under a Texas license, or lending through a bank partner.
4. Prepare the license application with the regulator named in the table, including ownership, financial and background information.
5. Build compliance into the product: disclosures, underwriting and fair-lending testing, servicing and collections procedures, and complaint handling.
6. Plan for ongoing duties: annual reports, examinations and notice of changes.

Servicing and collections

Servicing and collecting on loans brings further obligations, including Texas debt collection rules and the federal Fair Debt Collection Practices Act where it applies. Plan for these when you design the customer journey, not after the first missed payment. How repayments move is covered in ACH vs RTP vs FedNow.

Common questions

Do I need a license to make personal loans in Texas?

If the loans are consumer loans with interest above 10 percent a year and you are in the business of making them, Chapter 342 generally requires an OCCC license unless an exemption applies, such as being a bank.

Do business loans need a Texas license?

Business-purpose loans often fall outside the consumer lending licenses, but Texas usury limits and other rules still apply, and some products, such as those secured by a home, have their own rules.

Is earned wage access a loan in Texas?

The treatment of newer products such as earned wage access depends on their terms and on current legislation and agency views, which have been changing. Ask the OCCC or counsel about your specific product.

Which agency licenses mortgage loan originators in Texas?

The Texas Department of Savings and Mortgage Lending, under Finance Code Chapters 156 and 157, with licensing handled through NMLS.

For the anti-money-laundering, privacy and data rules that sit beside lending law, see the compliance checklist.